Data Neutral/Positive
The indexes close mixed Friday with positive internals on the NYSE and NASDAQ as volumes rose from the prior session. One technical improvement was seen on the charts while the data remains a mixture of neutral and positive signal. As such, we are maintaining our near term “neutral/positive” outlook for the major equity indexes.
- On the charts, the COMPQX (page 3), NDX (page 3) and DJT (page 4) closed lower Friday while the rest of the indexes posted gains. The only technical event generated on the charts was the DJI (page 2) closing above its short term downtrend line, turning said trend from negative to neutral. Thus all of the indexes, by our work, are in short term neutral/sideways patterns. The cumulative advance/decline lines for the All Exchange and NASDAQ remain negative with the NYSE’s neutral. All are below their 50 DMAs.
- The data is a mix of neutral and positive readings with all of the McClellan OB/OS Oscillators neutral (All Exchange:+17.89/-20.95 NYSE:+1865/-5.59 NASDAQ:+1952/-32.83. The Open Insider Buy/Sell Ratio is neutral as well at 87.7. Meanwhile the put/call ratios are bullish as the crowd remains long puts with a 0.74 Equity and 0.94 Total Put/Call Ratio (contrary indicators) while the pros as per the OEX P/C are long calls at 0.7. The detrended Rydex Ratio (contrary indicator) remains bullish at -1.59 as the leveraged ETF traders remain leveraged short. Seasonality remains encouraging has the November to April period coming out of a mid-term election year has seen positive returns since 1946 with a median return of 15% since 1930. Only two out of 21 periods were negative. Valuation, assuming current estimates hold, is below fair value with the forward 12 month earnings estimates for the SPX via Bloomberg of $171.27, leaving the forward 12 month p/e for the SPX at 16.0 versus the “rule of 20” implied fair value of a 16.9 multiple. The “earnings yield” stands at 6.26%.
- In conclusion, we are keeping our near term “neutral” outlook for the major equity indexes in place as we expect further consolidation of the rally off of the late October lows.
- SPX: 2,700/2,817
- DJI: 24,939/25,504
- Nasdaq: 7,108/7,401
- NDX: 6,770/6,993
- DJT: 10,347/10,746
- MID: 1,839/1,917
- Russell: 1,500/1,578
- VALUA: 5,936/6,243